GETTING THE RIGHT SUPPORT

All of the topics mentioned above need to be considered when starting and running a Bed and Breakfast business. This section will introduce you to the financial support you can get for your BnB.

Why is finance important?

Whilst the financial side can seem daunting and time consuming, without it your business is more likely to struggle.

SHOULD YOU INVEST IN AN ACCOUNTANT?

• You need to spend time on running your business and doing what you do best.

• Therefore, you need to invest in an accountant to help with the financial side.

• It is up to you how much time and cost you want to spend on this.

A proactive accountant should provide the following support:

1. Business Growth - help and advice to help your business grow

2. Business Plans

3. Ongoing Support - Bookkeeping, Payroll Services, VAT

4. Management Information - Regular Management Accounts and meetings

5. Raising Finance - Assistance and advice on financing

6. Tax advice - Tax planning for business owners, wealth management, Capital Allowance claims.

7. Compliance – Statutory accounts and tax returns

MORTGAGES AND FINANCE

Can you get a buy to let mortgage?

• It is not possible to get a Buy To Let mortgage because you are renting to more than 1 person

SELF INVESTED PENSION (SIP)

• You can do an SIP - Self-Invested Pension.

• This is where you take money from your pension and invest it in a property.

• Borrow against another property.

BUSINESS LOAN

• Earning ratio - banks are worried about getting their money.

WHAT IF YOU GET NO BOOKINGS? CAN YOU PAY THE BILL?

• We took out a 15 year business loan for 65% of the property value, an extension to our home mortgage for the balance.

• We then used savings to carry out the work.

Business Loan

• Lower setup

• Similar terms to a standard personal mortgage

• Can lend to a partnership - i.e. you can create a Limited Company but you don’t need to.

Creating a Limited Company (Benefits and Drawbacks)

• Drawbacks of creating a limited company are that you need to produce audited accounts (costly).

• The advantages of creating a limited company (protection) are not valid as all business loans are secured against the owners of the business.

Extra business loan information

• Bank will normally need at least a 30% contribution, lower than a standard mortgage.

• Advantage: you can make larger paybacks (normal mortgage is 10% per year) there is no limit to paybacks and no penalty clauses.

• Bank will look at the serviceability of the loan including the amount of income you’d expect to draw from the business.

Equity release from another property

• Possibly the cheapest option

Financial Information From Matt Bryant At Ocl Accountants Finance

• Finance

• A potentially major headache for those owning a B&B is money.

• Just getting started can be incredibly tough, but with the correct foresight, planning and preparation, it is possible.

HOW MUCH WILL I NEED TO SPEND?

The cost of starting a Bed and Breakfast will vary depending on if you:

• Already own a suitable property

• Are aiming at the budget end of the market Or

• The cost can be considerably higher if you have not yet purchased the right property and are looking to offer a high-end experience.

• These costs can very easily get out of control.

• Whatever your particular starting circumstances are, they should be factored into a business plan.

Websites

KEY WEBSITES YOU MAY FIND USEFUL gov.uk/set-up-business gov.uk/vat-registration/how-to-register gov.uk/log-in-file-self-assessment-tax-return gov.uk/write-business-plan

Summary Of Chapter 2b

We hope this chapter has helped introduce you to the financial aspects of running a BnB, including borrowing and support. Admittedly, they’re definitely not the most exciting part, but they are crucial steps that need to be completed in order to run a Bed and Breakfast that you’ll be proud of.

Final Tips

• Don’t just plan for the initial start-up of your B&B.

• Plan with the next 5 to 10 years in mind.

The next Chapter (3A) will introduce you to interior design configuration and renovation, soft furnishings and technology.